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EDITORIAL: Give flood victims a fair shake

Many victims of Hurricane Sandy have been cheated — sometimes repeatedly — by state and federal authorities as well as insurers. The list of abuses has been long and varied, from blatant underpayments to interminable delays. Lawmakers have taken steps to

Many victims of Hurricane Sandy have been cheated — sometimes repeatedly — by state and federal authorities as well as insurers. The list of abuses has been long and varied, from blatant underpayments to interminable delays.

Lawmakers have taken steps to try to correct the abuses, but in some cases those efforts have only led to further cheating. For an example, just look at the Federal Emergency Management Agency’s cynical efforts to review appeals by plugging claims into fixed formulas designed to maintain the underpayments.

We hope that a move underway to curb insurer excesses in the future finds more success.

The National Flood Insurance Program, which provides policies for hundreds of thousands of New Jersey homeowners, must be renewed later this year. But a bipartisan group of legislators wants reforms put in place to protect policyholders as part of that reauthorization process; among proposed provisions is a cap on annual premium increases of 10 percent — compared to the current 25 percent — and limits on profits by private-sector insurance companies through the program. FEMA and insurers would also face penalties for failing to deliver payments on strict deadlines.

Proposed changes unveiled during a news conference in Washington D.C. Tuesday also include a freeze on the program’s interest payments to the Treasury to strengthen overall finances, and incentives to encourage more flood mitigation efforts.

All of these measures come in needed response to the program’s Sandy failures, which themselves were an overreaction to recovery efforts in the wake of Hurricane Katrina along the Gulf Coast in 2005. After Katrina, FEMA received widespread criticism for overpaying on claims. As a result, the Sandy response was tainted by a boomerang effect in which officials and insurers were motivated to err on the side of underpaying claims. The practice became so rampant that FEMA eventually agreed to reopen nearly 150,000 claims, with the vast majority revealing the underpayments.

We support the reforms. Even under ordinary circumstances insurers are notorious for finding loopholes to reduce or deny claims outright. A favored scam typically tucked away in fine print is an exception for damage in a storm caused by “earth movement” — as if that movement is somehow unrelated to the rush of flood waters involved. Policyholders need help protecting themselves from these types of schemes, and Sandy was a sad reminder that insurers have no qualms victimizing homeowners who have already been victims.

Money is at the root of this particular evil, as usual, and the flood insurance program has long been plagued by financial concerns. But U.S. Sen. Robert Menendez, who helped promote the reforms Tuesday, emphasized that a key component would be shifting the overall program to a more preventative posture rather than remaining strictly reactionary. Low-interest loans would be available for larger-scale mitigation efforts and home elevation for individual homeowners; Menendez and other senators said such projects typically return $4 for every dollar spent.

Reforms would be welcome. So too would a more honest approach to helping those in need.